Government: Sector-specific predictions and implications

Housing and infrastructure delivery will be key themes in the Budget if the Chancellor is to mitigate anticipated tax rises with economic growth initiatives.

Craig Elder, partner in public procurement, and Gabor Taller, partner and co-head of social housing, look at what might be in store.

Investing in public infrastructure

In her pre-Budget speech, Chancellor Rachel Reeves rightly identified a lack of investment in public infrastructure as one key reason for sluggish economic growth.

She had appeared set to implement an income tax rise. While this would have been a significant U-turn on Labour’s general election manifesto, broadening the base of the main revenue-generating taxes would have been the clearest way to provide the financial headroom needed for infrastructure investment.

Rather than reduce infrastructure investment or borrow more, Ms Reeves may instead consider how to use the Budget to leverage private finance for funding a wide range of new infrastructure, such as hospitals, schools, prisons and transport systems.

The government has already suggested it will explore the use of public-private partnerships (PPPs) to back certain projects, including some community health centres and renewable energy schemes, but this remains a very narrow remit. 

We are working with the CBI to help shape future PPPs. New programmes must learn the lessons from previous models such as PFI – for example, by ensuring greater flexibility, transparency and better value risk transfer.

Housing

Delivering 1.5 million homes is a central pillar of the government’s economic growth strategy and a target it’s keen to bring frequent attention to. 

The new Social and Affordable Homes Programme (SAHP) covering 2026 to 2036 was published this month, setting out details for how the £39bn scheme will take shape. 

Its scale dwarves previous programmes in recent decades and the Budget offers an opportunity for government to shout about a genuinely bold intervention it’s making in housing delivery. However, it can’t be the only lever if it’s to meet the magic 1.5 million number.

Some Budget measures may include:

• Accelerated SAHP grant allocations to deliver completed homes during this parliament.
• Infrastructure and site-assembly funding for local authority housebuilding.
• Support for existing stock upgrades such as fire safety, cladding and energy performance, potentially with VAT relief on these works.
• Brownfield-unlocking measures, including infrastructure investment and further planning reforms.
• Balanced approach to SME developer taxation to help companies maintain viability amid build cost pressures.
• Clarity on implementation of rent convergence in the social housing sector.